Seoul, South Korea: Hyundai Motor Co., South Korea’s largest auto maker, plans to form a $400 million (around Rs18,760 crore) venture with Baotou Bei Ben Heavy-Duty Truck Co. Ltd in China next year to expand in the country set to become the world’s biggest auto market.
The companies signed an initial agreement on Saturday to form the 50:50 partnership, Hyundai said in an emailed statement on Sunday. The venture will take over Baotou’s existing heavy-truck operation with an annual production capacity of 40,000 vehicles, targeting sales of 100,000 heavy trucks in China in 2014, the statement said.
Seoul-based Hyundai has been seeking to penetrate China’s commercial vehicle market as the world’s fastest growing major economy spurs demand for construction equipment. Sales of medium and heavy trucks in China accounted for 29% of the global market in 2008 and development projects of the nation’s interior will further speed growth of the market, Hyundai said.
It’s a good move, said Lee Sang Hyun, an analyst at Hana Daetoo Securities Co. Ltd in Seoul. “Global auto companies aren’t aggressively targeting the commercial vehicle market in China yet, and I believe there lies opportunities for Hyundai.”
China a decade ago initiated a development plan for its western region, accounting for two-thirds of the country’s territory. The government aims to build energy, agriculture and tourism industries there as well as industries.
Entering China’s commercial vehicle market is essential for Hyundai to grow into a comprehensive vehicle manufacturer in the world’s largest auto market, Choi Han Young, vice-chairman at Hyundai’s commercial vehicle division, said in the statement.
Choi also said the Chinese venture will be pivotal in helping Hyundai meet its goal of selling 200,000 commercial vehicles worldwide by 2013.
Hyundai also plans to enter the US commercial vehicle market within three years, Yonhap News said on Sunday, citing Choi. While details haven’t been set, a joint venture is one possibility for entering the US market, it reported.
The agreement with Baotou Bei Ben is Hyundai’s third attempt to penetrate China’s commercial vehicle market after a 2004 agreement with Jianghuai Automobile Co. Ltd and a $1.2 billion deal with Guangzhou Automobile Group Co. Ltd in 2005 fell apart.
The venture will initially produce revamped models of the Chinese partner’s designs before introducing a model in 2012 based on Hyundai’s technology and equipment. The companies will cooperate in production and sales of vehicles and engines, research and development, after-sales service and distribution, the South Korean company said.
Baotou Bei Ben Heavy-Duty Truck, a unit of China North Industries Group., is the sixth largest maker of heavy trucks in China, operating three production plants, Hyundai said.
Hyundai, which has a joint venture making passenger cars with Beijing Automotive Industry Holdings Co. Ltd, plans to start construction of its third factory in China next year and together with affiliate Kia Motors Corp. expects its auto sales in China to top 1 million next year.